re: Net Worth at 30

quote:

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That's obviously a false statement. Let's go through it really slow:

1. You: "a mortgage is a liability"
CORRECT

2. Everyone: "net worth is assets minus liability"
Networth = Assets - Liability

3. Example: "I have ten bucks and a million dollar mortgage debt"

4. You: "Your net worth is ten bucks."

You believe this to be false as you are using the following for assets and liabilities:
ASSETS - $10 in your pocket
LIABILITIES - $1,000,000 mortgage

You believe the net worth should be 10 - 1,000,000 = -$999,990.00

Your liabilities portion is correct. However, you are excluding the value of the home (if there is one) in the assets column. Thus, if you truly have a home valued at $1,000,000 the following should be the formula:
ASSETS = $10 in your pocket and $1,000,000 home
LIABILITIES = $1,000,000
NET WORTH = ($10 + $1,000,000) - $1,000,000 = $10

Conclusion: Mortgage is not a liability. Your No. 1 and No. 4 are contradictions.

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